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A property deal is termed as being made at ‘arm's length’ if it is a normal commercial transaction between two or more persons. A transaction not likely to be at arm's length is one undertaken by persons related by blood, adoption or marriage, or who are living together.

HMRC requires a valuation of property if the transaction has not been made at ‘arm’s length’. The valuation will determine the market value and that is the figure that will be used as the proceeds amount in the capital gains tax (CGT) calculation on sale or other disposal.

Example:
Anton needs to sell his property quickly so that he can move abroad. Tony is aware that Anton needs a quick sale and therefore offers him a low price. No one else has made an offer. Anton accepts the offer.

The price was not the best possible price that could have achieved if the property had been left on the market for longer but Anton was trying to achieve the best deal possible in the time allowed.

This is deemed to be a bad bargain rather than being a bargain not made at ‘arm’s length’ and therefore the proceeds received will be used in any CGT calculation.
If Anton and Tony had been related (i.e. ‘connected persons’) HMRC would require a market valuation.